Note 13 - Regulatory Matters

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 13.  REGULATORY MATTERS

Our bank subsidiary, Summit Community Bank, Inc. (“Summit Community”), is subject to various regulatory capital requirements administered by the banking regulatory agencies. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, Summit Community must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.  Our bank subsidiary’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require Summit Community to maintain minimum amounts and ratios of Common Equity Tier 1("CET1"), Total capital and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).  We believe, as of March 31, 2024, that our bank subsidiary met all capital adequacy requirements to which they were subject.

The most recent notifications from the banking regulatory agencies categorized Summit Community as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, Summit Community must maintain minimum CET1, Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below.

In December 2018, the federal bank regulatory agencies approved a final rule modifying their regulatory capital rules to provide an option to phase-in over a period of three years the day-one regulatory capital effects of the implementation of ASC 326. In March 2020, those agencies approved a final rule providing an option to delay the estimated impact on regulatory capital. We elected this optional phase-in period upon adoption of ASC 326 on January 1, 2020 and elected to delay the estimated impact. The initial impact of adoption as well as 25% of the quarterly increases in the allowance for credit losses subsequent to adoption (collectively the “transition adjustments”) will be delayed for two years. After two years, the cumulative amount of the transition adjustments will become fixed and will be phased out of the regulatory capital calculations evenly over a three year period, with 75% recognized in year three, 50% recognized in year four, and 25% recognized in year five. After five years, the temporary regulatory capital benefits will be fully reversed.

The following tables present Summit's, as well as Summit Community's, actual and required minimum regulatory capital amounts and ratios as of  March 31, 2024 and  December 31, 2023.

Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended.

	Actual					Minimum Required Capital - Basel III					Minimum Required To Be Well Capitalized
Dollars in thousands	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2024
CET1 (to risk weighted assets)
Summit	$	381,890		9.4	%	$	285,018		7.0	%		N/A		N/A
Summit Community		488,335		12.0	%		284,426		7.0	%		264,110		6.5	%
Tier I Capital (to risk weighted assets)
Summit		415,810		10.2	%		346,093		8.5	%		N/A		N/A
Summit Community		488,335		12.0	%		345,375		8.5	%		325,059		8.0	%
Total Capital (to risk weighted assets)
Summit		570,628		14.0	%		427,527		10.5	%		N/A		N/A
Summit Community		539,145		13.3	%		426,640		10.5	%		406,324		10.0	%
Tier I Capital (to average assets)
Summit		415,810		9.0	%		184,166		4.0	%		N/A		N/A
Summit Community		488,335		10.6	%		183,982		4.0	%		229,977		5.0	%

	Actual					Minimum Required Capital - Basel III					Minimum Required To Be Well Capitalized
Dollars in thousands	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2023
CET1 (to risk weighted assets)
Summit		369,935		9.1	%		285,338		7.0	%		N/A		N/A
Summit Community		475,785		11.7	%		284,873		7.0	%		264,525		6.5	%
Tier I Capital (to risk weighted assets)
Summit		403,855		9.9	%		346,481		8.5	%		N/A		N/A
Summit Community		475,785		11.7	%		345,917		8.5	%		325,569		8.0	%
Total Capital (to risk weighted assets)
Summit		556,590		13.7	%		428,006		10.5	%		N/A		N/A
Summit Community		524,737		12.9	%		427,309		10.5	%		406,961		10.0	%
Tier I Capital (to average assets)
Summit		403,855		8.7	%		186,747		4.0	%		N/A		N/A
Summit Community		475,785		10.2	%		186,057		4.0	%		232,571		5.0	%